I came across a post from Bob Cringely (tech industry blogger), riffing on a recent speech by Roger McNamee (tech VC/investor), arguing that Facebook is “so 2010”.  In Silicon Valley, it’s the done thing to skate to beyond where the puck is headed, and to call things old before they are new.  But it’s a little far-fetched to declare Facebook as over when it has only so far demonstrated pervasive stickiness and not yet proven a scalable profit model, nor has the “next Facebook” yet emerged!

Here’s how Cringely’s argument runs:

1. Microsoft is decaying, which will free up industry profits/ investments to support new businesses based on HTML5 (i.e. web-based businesses that don’t require a client OS)
2. These new businesses won’t include Google, because the Post PC world is about mobile, and smartphone users don’t search, therefore Google has no relevant monetization vehicle
3. Therefore, Apple wins because it provides all the devices, and
4. Facebook wins because it has the stickiest app in the new world
5. But Facebook’s win will be short-lived, and it may not even be around in 15 years time, because the rate of change in the tech industry is accelerating

Let’s deconstruct this, point by point:

1. Microsoft is indeed in decline, but not because of HTML5;  most directly it’s because the Windows franchise does not yet have a credible answer for smartphones and tablets (and the current winner in that space, Apple, is all about native iOS apps being distributed via a closed iTunes ecosystem, not standards-based HTML5).  “Decline” is a relative term though;  even if this trend continues Microsoft isn’t going to die any time soon, only its growth has slowed down and may plateau.  Also, as an overall company, Microsoft may not yet have an answer on mobile (vs Apple and Android) and consumer Internet services (vs Google and Facebook), but its efforts in enterprise cloud (Office 365, Windows Azure) are under-appreciated.  I wouldn’t write them off just yet, they might still reinvent themselves.
2. Google is still in its heyday, with a lot of room to continue growing even just in its core ads business.  It doesn’t follow that it has missed out on mobile.  Firstly, smartphone users still search online, so it can continue to make money from that tollbooth.  Secondly, Android has been doing rather well and has greater unit share than Apple iOS.  Granted, there are challenges which Google has to sort through (e.g. patent portfolio and vertically integrated user experience which underpins its Motorola Mobility acquisition, at the cost of introducing channel conflict), but on the other hand, its mobile ads business is already $1 billion and growing.  (To compare, Facebook’s total revenues was only <$2 billion in the same period).
3. Apple is in a winning position not because it provides all (or even most of) the mobile devices, but because it provides the industry’s most profitable devices (and software and services to go with it in a closed system), even if it has only a minority unit share. This is based on its eminently admirable and difficult-to-emulate strategy of innovating new (or disrupting existing) consumer tech categories, and sucking all of the industry profits into its engine via premium pricing to early adopters/ religious devotees coupled with cost advantage through its vertically integrated value chain. That doesn’t mean Apple will dominate forever; in the past, horizontal challengers figured out how to commoditize Apple’s markets via ‘good enough’ offerings (the Wintel hegemony pulled this off before, perhaps Google/Android can do the deed this time around), and Apple has had to renew itself by jumping into new categories. This is extremely difficult for a company to do in any industry, let alone multiple times (e.g. from portable music players to smartphones to tablets), and I would argue that the singular vision and ironfisted discipline of Steve Jobs was an essential element. With Steve no longer in an executive role, the jury is out on whether Apple can do that again. Though it has to be said that Apple seems to have learned from its past mistakes and is in a much stronger position now with smartphones and tablets that it was with Macs 25 years ago, with a maniacal focus on building a sticky platform with strong developer support; so even if Apple were just to ‘milk’ its “i-“ franchise it will be some years yet before commoditization makes a dent on its formidable revenue/profit growth engine.
4. Facebook is indeed on the track to ‘winning’ with its new platform (it has 750M+ users with high engagement metrics, which will difficult to dislodge), but it hasn’t yet won (it has yet to demonstrate a scalable, profitable method of monetizing these users with steadily growing ARPU) – though it may be close.  It’s a bit hard to say it’s in decline when it hasn’t yet fully lifted off!
5. Along that vein, Cringely predicts that Facebook will ‘reign’ for only 7 years (vs. 10-25 years each for ‘former’ tech titans Google, Microsoft, DEC, IBM), and that while it will have a mega IPO in the short term, it will not be a major tech player by 2025.  On whether Facebook has 7 or many more years in the sun, it depends on many factors, including what sustainable and differentiated business/revenue model it lands on.  You could maybe argue that in a cloud-based world, the next tech titan will emerge faster and more aggressively than in the past.  But on the other hand, no one yet knows what the next ‘Facebook’ will be (if I knew, I would be out there building it, not writing this blog!)  Cringely posits that it will be about “reclaiming our personal data” and that it will be about “the data is the computer”, but that’s missing the point.  Facebook already proves that “the data is the computer”, because its business is built around the massive and growing asset that is your and my willingly submitted personal data and preferences.  Instead, the Next Facebook will spring from discovering (or inventing) the next pervasive virtual user activity – something which almost everyone will do, and be willing to spend ‘currency’ doing it (whether it is time, cash, attention, data, or all of the above!)  If you and I were sitting in a café 10 years ago debating what would be the next Microsoft or Google, who would have thought that it would be a way of keeping up with your family, friends and barely-known acquaintances with cheesy photos, narcissistic SMS-text-length updates and, according to some critics, Skinner Box retreads of ancient Atari and C64 games?

As to Cringely’s final assertion that Facebook will not be a major player in 15 years, I would say we don’t know enough right now to support that.  Whether Facebook disappears that quickly will depend rather less on its current competitive position and assets, and much more on its top leadership and personalities (i.e. Zuckerberg) and its ability to reinvent itself, potentially along radically different lines.  For instance, according to Cringely, IBM was only a bigwig from 1960-85, but in fact, 25 years later, it is still worth >$200B (more than Google, and 2-4x Facebook), because it found a way to renew itself, getting out of lower margin consumer hardware businesses while finding a way to milk its mainframe business (which is still a major cash cow today) and move into more attractive enterprise software and professional services plays (a transformation which HP is attempting to emulate under Léo Apotheker).  As we noted earlier, Apple famously renewed itself multiple times under Steve Jobs’ leadership.  Even Microsoft reinvigorated itself in the transition from character-based to GUI-based PCs (DOS to Windows), and then from desktops to notebooks and from minis/mainframes to x86 servers – again, all under a founder’s (Bill Gates’) watch.  DEC, on the other hand, stumbled and fell into the hands of Compaq, then HP, because co-founder Ken Olsen was unwilling to let go of his VAX (minicomputer) cashflow engine for too long.

Under this analysis, Google might still have a renewal cycle left (especially if co-founder Larry Page proves a competent large tech CEO).  Apple might struggle after it has squeezed every last drop of profit out of premium smartphones and tablets over the next few years, when commoditization catches up with them.  Microsoft is at its crossroads now; perhaps it will metamorphose into what consumer tech titans become after they die, which is an enterprise IT powerhouse (à la IBM) – though likely not if Steve Ballmer is still in charge and Bill can pull strings from afar, given the duo’s predilection to invest big in consumer, e.g. sinking $ billions into chasing after Google in online services.  And even if we assume Facebook fulfills its destiny and “takes off” as the next bona fide tech titan, whether or not it will still be around in 15 years depends on its ability to renew, adapt and change to the fast-moving creative destruction that is the global tech industry.  Interesting times!